Podcast Summary: The Real Time Show – "Has Gold's Lustre Worn Off? Alon And David Discuss..."

Podcast Information

• Title: The Real Time Show
• Hosts: Rob Nudds & Alon Ben Joseph
• Episode: Has Gold's Lustre Worn Off? Alon And David Discuss...
• Release Date: October 27, 2024
• Description: Real questions. Real Answers. Real talk. The world's most interactive watchmaking podcast, hosted by Rob Nudds and Alon Ben Joseph.

1. Introduction and Listener Questions

In this episode, hosts Rob Nudds and Alon Ben Joseph are joined by their regular guest, David Vaucher, who calls in from Fontainebleau. The trio delves into a series of listener-submitted questions, focusing primarily on the allure and practicality of gold watches in today's market, as well as broader industry trends.

2. The Allure of Gold Watches

Listener Contribution: A listener named Burned reached out with enthusiasm for the podcast and posed a question about the current appeal of gold watches. Burned inquired about recommendations for a great gold watch currently available at retail and sought opinions on vintage pieces if new options were scarce.

Alon's Recommendation: Alon responded promptly, recommending the Grandcycle Quartz 9587-8010, emphasizing its standout features and asserting, "No need to look any further" ([01:01]).

David's Insights on Gold Watches: David shared his personal preferences and historical influences, noting his fondness for two-tone watches, a style he attributes to his upbringing in the 80s with his father's two-tone watch. He emphasized practicality over opulence when considering gold watches, stating:

"Gold is not a very practical material. If you're looking for specs and strength and hardness, gold's actually pretty terrible." ([01:56])

David highlighted the juxtaposition of affordable Seiko quartz movements with the luxury of gold, cautioning against purchasing gold watches solely for their material value. He stressed the importance of gold adding aesthetic or functional value to the watch rather than serving as a status symbol. David concluded his segment by expressing a preference for Hublot Big Bang Chronograph as his ideal gold watch, aligning with his practical yet stylish taste ([02:45]).

Notable Quote: "If you buy two tone, you're opting for a look, you're opting for a vibe." – David Vaucher ([05:06])

3. Two-Tone vs. Full Gold Watches

Discussion: Rob posed a question regarding two-tone watches, asking whether they serve as a "poor man's gold watch" or add a touch of bling to a steel watch. He also inquired about the origins of two-tone watches.

David's Perspective: David defended the two-tone aesthetic, arguing that it offers a unique look rather than merely being a cost-effective alternative to full gold watches. He shared a personal anecdote about his father's two-tone "Texas Timex," associating the style with a specific regional vibe rather than financial necessity. David encouraged listeners to choose two-tone watches if the style resonated with them, rather than as a placeholder for more expensive gold pieces ([05:06]).

Notable Quote:

"You should absolutely go for it probably if you like two tone and that's your thing." – David Vaucher ([05:06])

4. Vintage Gold Watches and Market Trends

Alon's Contribution: Rob shared a personal story about his brother purchasing a vintage Rolex Day-Date, highlighting differing taste preferences within the same household. Alon expressed interest in vintage gold watches like the Omega Speedmaster and Zenith Chronomaster Sport Gold, noting that the current market has become more favorable for purchasing gold watches due to recent price drops and increased availability of discounts on gold pieces ([08:39]).

David's Additional Thoughts: David touched upon the fun aspect of owning unique gold watches and emphasized practicality. He suggested that investing in a gold watch should be about the enjoyment it brings rather than purely financial investment ([08:39]).

Notable Quote:

"It has to add something to the watch... if I were buying gold, it would have to be something that's fun." – David Vaucher ([03:25])

5. Optimal Placement of Watches on the Wrist

Listener Contribution: A question from Lawrence Van Hove addressed the best position to wear a watch on the wrist, referencing observations of Alon and Rob sporting watches near the wrist bone.

Alon's Advice: Alon emphasized personal comfort and individual preference, explaining that historical norms often dictated wearing watches under the cuff for elegance. He highlighted modern trends of wearing watches looser, allowing them to dangle, which aligns with contemporary fashion and active lifestyles:

"You should wear your watch however you feel comfortable." ([09:57])

David's Preferences: David shared his preference for a tighter fit to prevent the watch from flopping around, relating it to practical reasons and appearance. He noted the evolution of fashion trends from baggy to tighter fits and how that influences watch-wearing styles ([12:35]).

Notable Quote:

"Everyone should just do what's most comfortable for them." – Alon Ben Joseph ([09:57])

6. Current State of the Watch Industry

Listener Contribution: Jacques Jordan from LinkedIn asked about the current financial state of the watch industry, particularly focusing on the Swatch Group's recent downturn and the broader implications for other major players like LVMH and Richemont.

David's Analysis: David provided an in-depth analysis of the Swatch Group's financial struggles, citing a revenue drop of nearly 20% and a significant decline in operational margins from 19% to 11%. He attributed these declines to factors such as currency fluctuations, over-reliance on the Chinese market, and the risks associated with high-margin products like the Moon Swatch. David questioned whether the industry's downturn represents a true collapse or a reversion to historical norms post-COVID, ultimately labeling it as a necessary market correction:

"It's a natural correction, it's an important correction, it's a necessary correction." – David Vaucher ([26:11])

Alon's Financial Insights: Alon corroborated David's points, providing specific financial metrics for major groups like Richemont and Swatch. He criticized the Swatch Group's inadequate hedging against currency exposure and highlighted the structural differences between major luxury groups. Alon stressed that the Swatch Group's industrialized approach, which aggregates multiple brands under one umbrella, might pose long-term sustainability challenges:

"The Swatch Group is very much industrialized... because they produce so much, that means they have way more inventory." – Alon Ben Joseph ([35:55])

Notable Quote:

"Everything that goes up must come down. So it's a natural correction." – David Vaucher ([26:11])

7. The Future of the Watch Industry: Bifurcation and Sustainability

David's Vision: David expressed concerns about the industry's bifurcation, noting that while high-end brands like Patek Philippe and Hermes fare better, the focus on ultra-luxury segments might not be sustainable. He predicted that the industry lacks diversity in its target demographic, catering instead to a narrow, affluent audience. David warned that ignoring broader market needs could lead to further decline, suggesting that the industry's future hinges on adaptability and addressing the diverse preferences of consumers:

"We're selling more and more expensive watches to the same, you know, handful of people over and over again." – David Vaucher ([29:23])

Alon's Perspective: Alon highlighted the unique position of the Swatch Group in the industry, acknowledging its pivotal role in sustaining the Swiss watch market through industrial efficiency and diverse brand portfolios. He reflected on the group's challenges, such as over-reliance on specific products and market segments, and contemplated the long-term viability amidst increasing inventory levels and shifting consumer preferences:

"Swatch is a very particular place in where the business is at now because... they're the ones that can share these movements." – Alon Ben Joseph ([35:55])

8. The American Market and Smartwatches' Impact

Rob's Inquiry: Rob questioned why the American market has become the leading destination for Swiss watch exports and whether the US can maintain this position. He also pondered the role of smartwatches, particularly the Apple Watch, in influencing traditional watch sales.

David's Observations: David attributed the US market's prominence to cultural factors, noting that in Europe, watches are deeply ingrained as traditional markers of style and celebration. He contrasted this with the American tendency towards practicality and data-driven gadgets like the Apple Watch, which tracks various personal metrics. David suggested that the integration of smartwatches might limit the growth potential for traditional Swiss watches in the US by catering to a different set of consumer needs:

"In a world where the dollar is not the world's reserve currency... that would have an effect." – David Vaucher ([40:07])

Rob's Contextualization: Rob provided a comparative perspective by highlighting the sheer volume of Apple Watch sales, which far exceed those of the entire Swiss watch industry. He posited that smartwatches serve as an entry point for individuals who might later transition to traditional watches, but emphasized that the overarching impact of smartwatches like Apple's remains significant:

"There’s something on people’s wrists, but again, you're not really going to grow the pie." – Rob Nudds ([42:59])

Notable Quote:

"It's like the watch is jewelry because it's like, you know, like a bracelet or a cuff that you might sell in your store." – David Vaucher ([12:35])

9. Responding to Industry Downturn: Denial or Adaptation?

Listener Contribution: Max Loyal from the TRTS network posed a twofold question about the watch industry's current landscape, specifically asking whether brands' lack of reaction to the downturn signifies a potential market rebirth or if such ignorance could lead to further decline.

David's Response: David characterized the current landscape as "changing" and expressed pessimism about the industry's ability to adapt swiftly. He criticized brands for not addressing the underlying issues and suggested that the worst is yet to come. David encouraged consumers to be proactive, advocating for savvy shopping and constructive feedback to influence brand decisions:

"The watch industry... has to look very different in five years time than it does now." – David Vaucher ([48:56])

Alon's Take: Alon echoed David's concerns, labeling the industry's response strategies as "ostrish strategy" — ignoring problems in hopes they will resolve themselves. He lamented the lack of proactive changes among major brands and forecasted continued decline due to this inertia:

"Fear and when you're attacked you can do three things right? You can freeze, flee or fight." – Alon Ben Joseph ([50:20])

Notable Quote:

"Consumers’ tastes are changing. They are going to have different expectations." – David Vaucher ([48:56])

10. Conclusion

Rob wrapped up the episode by encouraging listeners to join the TRTS community, emphasizing the value of diverse opinions and critical discussions. He thanked David for his insights and reminded the audience to engage with the podcast through subscriptions and social media interactions.

Key Takeaways

1. Gold Watches: While aesthetically appealing, gold watches may lack practicality due to gold's softness and weight. Two-tone watches offer a stylistic alternative without solely relying on gold's status.

2. Watch Placement: There is no universally "correct" way to wear a watch; personal comfort and style are paramount. Historical norms differ from modern trends, influencing how watches are worn today.

3. Industry Health: The watch industry, particularly major players like the Swatch Group, is experiencing significant financial challenges. Factors include currency fluctuations, over-reliance on specific markets like China, and inventory overhang.

4. Market Dynamics: The US remains the largest market for Swiss watch exports, but cultural differences and the rise of smartwatches like the Apple Watch could impact future growth and sales patterns.

5. Future Outlook: The industry is at a crossroads, with concerns about sustainability and adaptability. Brands' reluctance to address downturns proactively may lead to further declines, highlighting the need for strategic evolution.

Notable Quotes:

• "If you buy two tone, you're opting for a look, you're opting for a vibe." – David Vaucher ([05:06])
• "Everything that goes up must come down. So it's a natural correction." – David Vaucher ([26:11])
• "Fear and when you're attacked you can do three things right? You can freeze, flee or fight." – Alon Ben Joseph ([50:20])

This episode of The Real Time Show provides a comprehensive look into the current state and future prospects of the watch industry, blending personal anecdotes with industry analysis to offer listeners a nuanced perspective on luxury timepieces.